New consumer research has found that a significant share of older Australians with private health insurance are considering dropping their cover in response to the federal government’s proposed rebate reduction – a finding that points to a potential membership impact well beyond official projections. The research arrives as funds prepare premium round applications in which the April 2027 change must be formally priced for the first time.
The research, conducted by RedBridge between May 26 and June 3, 2026, surveyed 1,505 Australian citizens aged 18 and over across 22 Commonwealth electoral divisions. Among respondents aged 65 and over who currently hold health insurance, 39% said the rebate change would make them more likely to drop their cover, according to a July 31, 2026, release by Private Healthcare Australia (PHA), the peak body for health insurance funds.
The government has projected approximately 44,000 exits from private health insurance as a result of the change. Private Healthcare Australia CEO Dr Rachel David said the polling data suggests that figure is a significant underestimate. COTA Australia, the national advocacy body for older Australians, reported separately that more than 33% of its 40,000 members are planning to downgrade or cancel their cover, as reported by Nine on July 31, 2026.
The divergence matters commercially. According to the Australian Prudential Regulation Authority’s (APRA) December 2025 quarterly statistics, the age group for which most hospital treatment benefits are paid is 75-79 – the same cohort that recorded the largest gross coverage increase of any age group in that quarter. If price-sensitive members in this high-utilising segment are among the first to exit, the impact on fund claims experience would extend beyond what lapse volumes alone suggest.
Private Healthcare Australia also warned that outright exits understate the actuarial problem. “We are concerned many older Australians will move to cheaper policies with significant exclusions or restrictions and only discover they are not covered when they need treatment,” David said. Downgrades – from Gold to Silver-level cover – reduce premium revenue without removing the member from the fund’s claims exposure. A member who downgrades to a policy that excludes hip replacements or cataract surgery and subsequently requires those procedures creates a gap payment dispute rather than a clean lapse. For claims managers and product teams, that scenario carries distinct complexity from an outright exit.
The commercial risk is concentrated in a membership segment that is both price-sensitive and high-utilising. Around 70% of insured Australians aged over 65 earn $55,000 or less, while more than 80% fall within the base income tier. These are predominantly retirees on fixed incomes. If lower-income members – who are also the most price-sensitive – exit first, the remaining risk pool skews toward higher-income but still older, higher-utilising members, creating upward pressure on premiums across all age groups.
Members Health Fund Alliance modelling found the rebate changes are equivalent to an average effective premium increase of around 9% for affected members, with some facing increases closer to 12% on top of normal annual premium rises. The government approved an industry-average premium increase of 4.41% from April 1, 2026, the highest average increase since 2017. Against that baseline, the November 2026 premium round applications – the first round ahead of the April 2027 rebate change taking effect – are expected to require funds to assess potential membership and claims impacts. This comes as the government’s own analysis acknowledges uncertainty around the scale of any participation changes and downstream effects on the health system.
The Office of Impact Analysis assessed the government's Impact Analysis on the rebate change as “adequate” rather than “good practice,” noting the analysis would have benefitted from further consultation. The government’s own projection anticipated a marginal negative impact on PHI participation of -0.4% in 2028-29 compared to the status quo, while acknowledging the corresponding increase in public hospital demand could not be reliably quantified.
Independent actuarial modelling by Finity, cited by Members Health Fund Alliance, reaches a materially different conclusion. The modelling suggests the changes may reduce Commonwealth rebate expenditure by around $482 million but could shift approximately $547 million in additional costs onto public hospitals – a net fiscal negative if the projection holds. The public hospital system is already managing rising demand: public hospital admissions from elective surgery waiting lists reached 791,000 in 2024-25, up from 712,000 in 2015-16, according to the AIHW. Nationally, the median waiting time for patients admitted from public hospital elective surgery waiting lists was 45 days in 2024-25, highlighting the pressure that additional demand could place on the system if private health insurance participation declines.
The RedBridge polling found resistance is not confined to older cohorts. Among all 1,505 respondents, 53% preferred an alternative approach that would exempt Age Pensioners and low-income older Australians from the rebate reduction, according to Private Healthcare Australia. That preference held across age groups – 55% among 18 to 34-year-olds and 54% among 35 to 49-year-olds – and among 59% of Labor voters, compared with just 15% who supported the policy as announced.
Eight peak bodies wrote to Prime Minister Anthony Albanese on June 11, 2026, calling for further consultation before the measure proceeds to parliament. Private Healthcare Australia has identified regional private hospitals where more than 70% of privately insured patients are aged over 65, making them particularly vulnerable to any change in older Australians’ insurance participation. For funds with membership concentrated in those communities, the lapse risk is not an industry average.
Premium round applications are submitted to the Department of Health, Disability and Ageing in November for changes to take effect from April 1 the following year. The legislation governing the rebate change has not yet passed parliament. Funds must price for a policy whose legislative outcome remains unresolved – and whose demand impact the government’s own analysis could not quantify.
